10 Reasons to Buy a Software Licensing & Entitlement Management Solution

1. WHITEPAPER
10 Reasons to Buy a Software Licensing &
Entitlement Management Solution
by Cris Wendt
Principal Strategy Consultant, Flexera Software

2. Flexera Software: FlexNet Producer Suite White Paper Series2
Introduction
The ROI and benefits of buying a commercial off-the-shelf
(COTS) Licensing and Entitlement Management System versus
building one in-house will vary from customer to customer, based
upon business needs and market conditions. Historically, many
of our hundreds of customers attempted to build their own
systems, when at some point they realized that it was a losing
proposition. The in-house solution was insufficiently flexible and
scalable, and required too many resources that could be applied
in other areas of core-competency. Ultimately, they decided that
a COTS solution was best.
While the value proposition and exact ROI for buying a COTS
solution will differ for each customer, some of the areas below
were used to develop the business case to buy a COTS solution
rather than build one or, to abandon an existing solution for one
that was commercially available:
1. Future-Proofing for Market Advantage:
Commercial solutions will ALWAYS have more functionality,
more associated best practices, and more industry case studies,
allowing you to design a solution that will meet your needs today
and into the future. This provides product agility which means the
capability to proactively or reactively change product packaging,
license models, and pricing to meet market conditions.
Companies most challenged by the need to offer new license
models, and consequently who build competitive differentiation
with licensing and pricing models rely on COTS offerings. This
includes market segments that have traditionally had small
markets, high-priced software, and a wide portfolio of products,
including: Electronic Design (Magma Design Automation),
Mechanical Design (AutoDesk), Software Development (Borland),
and Oil & Gas Exploration Halliburton).
In the past 6 – 12 months, enterprise software companies (ERP,
CRM, storage management, etc.) are beginning to feel some of
the market pressures that had traditionally been limited to the
solution vertical segments. As markets become more saturated,
as virtualization and SaaS are emerging, and with compliance
becoming more critical, even enterprise software companies are
looking at new ways to “future proof” their business.
Benefit Characterization: Increased revenue and/or decreased
discounts from 2 – 10 percent can occur with improved license
models, product packaging, improved compliance, and more
rapid deployment of new products to market.
2. Faster Time-to-Benefit:
Commercial solutions are typically ready-to-go, and have many
associated best-practices and implementation case studies for
a variety of processes, license models, and customer-facing
facilities associated with licensing and entitlement management.
The deployment of a COTS solution doesn’t suffer from endless
internal cycles to define and refine requirements for systems and
processes most companies don’t fully understand. Companies
such as Avocent (Data Center Software), Rosetta Stone
(Language Learning) and Tableau (Data visualization software)
have realized these benefits.
Benefit Characterization: Reduction in implementation from 6 –
12 months for an entire IT or product development team is not
uncommon. Secondary benefits can be the release of a new
product dependent upon the availability of a new license or
entitlement management system.
3. Solution Tuned to the Unique Needs of the
Software Business:
Customers who internally develop systems tend to base
their entitlement management solution around a classic ERP
implementation. ERP systems are effective for managing finances
and for facilitating the development of physical entities, but are
usually not built to support the unique needs of the software or
intelligent device markets. On the other hand, COTS licensing
and entitlement management systems provide effective support
for the “product lifecycle” – the morphing of software products
over time due to upgrades, updates, moves, transfers, end-of-life,
M&A, etc. Customers with internally-developed systems tend to
lose track of their customer entitlements over the lifecycle of the

3. 10 Reasons for a COTS Licensing & Entitlement Management Solution
3Flexera Software: FlexNet Producer Suite White Paper Series
product, resulting in lost renewal or upgrade revenue, manual
processes, and ultimately, customer dissatisfaction. This was one
of the driving reasons that led to Serena Software choosing a
COTS solution.
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems. In addition, maintenance
renewal rates can be as low as 55-60 percent with poor visibility
into customer entitlements, as opposed to a more typical 85-90
percent renewal rate.
4. Core Competency Focus for Internal Resources:
Companies don’t want to use their best product and IT
development resources investing in the development of licensing
and entitlement management solutions. Companies want to use
their top talent to focus on the development of market-leading
products in areas of core competency, and not to innovate in
licensing or entitlement management.
Benefit Characterization: The benefit is more difficult to quantify,
but is typically related to delays in new product releases from
6 – 12 months as critical resources can’t be applied to a new
product development.
5. Business Scalability / Accelerated Benefits for M&A
Activity: Companies that buy COTS solutions tend to
standardize on that solution across their range of product
offerings and business processes, lowering operational and
development costs via “reusable” and standard components and
eliminating manual processes. Companies that build solutions
tend to continually expand their licensing and entitlement
management solution as they acquire new companies, never
standardizing on a single approach, as each approach is
tuned to a particular software title. Costs become excessive
through multiple systems and extensive manual process across
several organizations.
More importantly, the lack of a standard license and entitlement
management platform limits the capacity for companies to create
meaningful “solutions” across companies that are acquired,
and increases the probability that financial numbers are missed
in a particular financial period due to inefficient operational
processes. Companies such as IBM and Synopsys have created
standard entitlement management and license platforms that
form the basis for ongoing integration of new companies.
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems (also described above) In
addition, a company’s market position can be eroded if they
cannot assimilate acquired products into solutions or
bundles, leading to an additional 10-15 percent discount for
some products.
6. Lifecycle Productivity of the Solution:
Over time, resources once applied to the development of a
homegrown system tend to move on to other projects, and
it becomes increasingly difficult to find resources to manage
changes to a licensing and entitlement management solution that
are required to remain competitive in the market. As a result,
solutions cannot grow to meet the needs of an evolving market,
typically leading to higher internal support costs, and possibly
affecting the product side with increased discounts and erosion
of market position as companies can’t easily adjust to what the
market needs. CA recently chose to purchase a COTS solution as
their internal systems reached a point where business scalability
became a major issue.
Benefit Characterization: Over time, companies can spend from
1-2 percent of total revenues on manual processes associated
with improperly working systems (also described above). In
addition, unexpected enhancements to existing systems may
need to be delayed.
7. Customer Satisfaction:
Commercial facilities have a breadth of usage reporting and
compliance management facilities that bring value to customers
in the form of more effective asset management, chargeback,
workflow analysis, and the capability to control access to
users on an as-needed basis. These facilities are rarely, if ever
available with an internally developed system. Companies such
as Halliburton, Synopsys, and EMC use the breadth of facilities
in licensing to provide customers with more comprehensive tools
to help manage their budgeting and usage.
COTS solutions also have out-of-the-box customer-facing
portals to enable 24 x 7 self-service to perform a number of
administrative and compliance tasks.
Benefit Characterization: It’s difficult to track the impact of a
poor customer experience to revenue. But “making it easy for my
customer to do business with my” is a phrase we hear often as
a mandate from the executive team, clearly indicating that
there is an important link between customer satisfaction and
overall revenue.
8. Increased Revenue from Enterprise Agreements:
Many of the usage reporting facilities enable software
publishers to tune enterprise-level agreements for their largest
customers based upon a mutually agreed usage and pricing
formula (typically tuned to the need of each customer). It’s not
uncommon for many software publishers to obtain 50 percent
or more of their revenue from a handful of accounts who have
special, non-standard enterprise agreements.
The inability to gather accurate usage information often results
in software publishers missing the opportunity to gather upside
revenue that is built into the agreement because there is a lack
of factual information. More importantly, the availability of these
facilities enable software producers such as Cadence Design
Systems to pro-actively construct enterprise-level agreements
that make it easier for their largest customers to consume large
amounts of software, thus creating a competitive advantage
with their largest customers.
Benefit Characterization: It’s not unusual for some companies to
obtain an increase 2-5 percent of overall revenue by constructing
more effective agreements with their large companies.

4. 10 Reasons for a COTS Licensing & Entitlement Management Solution
Flexera Software: FlexNet Producer Suite White Paper Series4
9. Industry & Best Practice Expertise:
The services organizations of COTS entitlement and license
management companies have extensive industry experience
with many customers in different markets (with many different
business processes and back-office systems) and often
understand what license and pricing models are more effective
in different customer segments, and, how to most efficiently
deploy those models in an operationally efficient way. These
organizations can provide valuable input on a variety of
licensing and entitlement management best practices in the
areas of maintenance, product pricing, product structure and
packaging optimization, product lifecycle management, channel
models, business processes and high-availability systems that
tend to drain companies of valuable resources because they all
tend to fall into a few common traps. Companies such as Novell,
CA, EMC, Autodesk, Siemens and others have relied on expert
advice to design and tune their solutions.
Possible Benefit: The availability of services for a COTS solution
is part and parcel of all the benefits listed above, including the
characterization of an individual business benefits profile.
10. Risk Reduction:
Ultimately, there is a large investment that is going to be made
over time in an entitlement and license management system.
This investment affects all aspects of the organization and the
capability to “get it right” across so many stakeholders is
difficult and not typically within the realm of most companies.
Most COTS companies, such as Flexera Software have
successful records of achieving results. Why not partner with
a proven partner?
Possible Benefit: The successful deployment of your project.
So, think you want to build it yourself? Think again!
About Flexera Software
Flexera Software is the leading provider of strategic solutions
for Application Usage Management; solutions delivering
continuous compliance, optimized usage and maximized value
to application producers and their customers. Flexera Software
is trusted by more than 80,000 customers that depend on
our comprehensive solutions- from installation and licensing,
entitlement and compliance management to application
readiness and enterprise license optimization - to strategically
manage application usage and achieve breakthrough results
realized only through the systems-level approach we provide.
Flexera Software is a privately-held company and an investment
of private equity firm Thoma Bravo, LLC. For more information,
please go to: www.flexerasoftware.com
For more on software licensing and entitlement
management trends, visit our blog at:
http://blogs.flexerasoftware.com/ecm/

5. © 2011 Flexera Software, Inc. and/or InstallShield Co. Inc. All other brand and product names mentioned herein may be the trademarks and registered trademarks of their respective owners.
ECM_WP_BuildVsBuy_June11
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